Why This AI Stock is Rising Despite Tech Sell-Off

Key Points

• Palantir stock is up at a time when the great tech rotation has started.
• Institutions missed this latest run-up and may be trying to catch up.
• A top analyst just increased his price target for PLTR stock. 

There’s a rotation away from technology stocks, but that message hasn’t dampened the optimism for retail investors in Palantir Technologies Inc. NYSE: PLTR. Shares of the AI and big data company are up 67% in 2024 and 11% in the 30 days ending July 19, 2024.  

But the question is why? The answer could simply be a case of FOMO by institutions (more on that later). It could also be the realization that if interest rates come down, it will reduce concerns about corporate spending on AI going down.  

That would be bullish for PLTR stock, not because Palantir has a debt problem but because it greases the wheels of the global economy. Here are three other reasons to consider PLTR stock. 

Institutions May Be Playing Catch-Up  

The price movement in PLTR stock over the past few years is still primarily coming from a committed (some would say fanatical) base of retail investors. Only 45% of the stock’s float is owned by institutions.  

However, institutions mostly ignored the stock when it was trading under $10 per share just two years ago. I say mostly because, in the second quarter of 2023, institutions were heavy buyers of PLTR. That also corresponded with the stock moving sharply above $10 per share.  

However, institutions were mostly on the sidelines for this recent run-up, preferring other SaaS companies such as Snowflake Inc. NYSE: SNOW. Now that PLTR has soared to over $28 per share, many of those same institutions say that PLTR stock is overvalued.  

It may be by many fundamental metrics. Future earnings reports will show if the company can grow into that valuation. But in many cases, institutions just hope to shake out some loose hands to grab shares at a better price. 

While they wait, they may find out that, much like NVIDIA Corporation NASDAQ: NVDA, they have to fish where the fish are at a certain point. And with PLTR stock being relatively unaffected by the shift from tech, Palantir is a big fish in that pond.  

This Analyst Just Raised His Price Target for PLTR Stock 

Dan Ives of Wedbush is one of the biggest Palantir bulls. Earlier this year, he referred to the company as the Lionel Messi of AI. That’s a big claim, but Ives recently doubled down on his bullish outlook for PLTR stock. 

On July 18, Ives raised his bull case target price for Palantir to $50 from $35. Posting on X, Ives remarked, “With AI spending taking up more spending in IT budgets as more organizations learn how to properly implement this tech, we believe the Messi of AI Palantir is in a prime spot to continue expanding its pipeline as AIP is front and center...” 

Inclusion in the S&P 500 Would Cement PLTR Stock’s Bonafides 

In June, the S&P 500 Index opted not to include Palantir in its quarterly rotation. But the feeling then and now is that including Palantir is a matter of when not if. When that happens, many institutions that are still on the sidelines will jump in. 

When they do, if Ives is correct, and if institutions buy in, it’s go time. Investors may want to start a position before the company reports earnings on August 5.